Law:

Section:

Section 23 of the income-tax act, 1961-Income from house property-Annual value-Assessee let out its property to a company which resolves to purchase said property in may 1965 and also resolves not to pay rent thereafter-Sale deed executed in may 1966-Whether rental income for period may 1965 to may 1966 includible in assessee's property income-Held, on facts, yes Facts The assessee-HUF let out its house property in 1961 to a company on a monthly rental of Rs. 6,000. After certain preliminary discussions in 1963, the board of directors of the company resolved on 7-5-1965 that the company would purchase the property, that the company had paid Rs. 10 lakhs as advance to the assessee on the same date for this purpose, and that the company would stop paying rent with effect from 1-5-1965. Though the resolution specified a period of three months for effecting conveyance of property, the sale deed, specifying a consideration of Rs. 11.05 lakhs, was executed on 31-5-1966. The assessee claimed that no income from this property should be included in its income for the assessment year 1966-67. The ITO rejected the claim on the ground that there was no evidence to show that the assessee had agreed to waive the rent from 1-5-1965, nor did the sale deed make any reference to any earlier agreement. Holding that the assessee continued to be the legal owner of the property till 31-5-1966 and the fact of non-receipt of income was immaterial in making an assessment under section 22, the ITO included the income from the property in the total income of the assessee. The AAC confirmed the action of the ITO and observed that no specific reasons for the delay in execution of the sale deed had been given and the sale price had not been stipulated, either in the preliminary discussions in 1963 or in the subsequent discussions in 1965. Before the Tribunal, the assessee contended (i) that even assuming that the assessee had not parted with legal title to the property till 31-5-1966, it could not be treated as the owner of the property, as it was bereft of all rights over the income from the property after an agreement of sale had been entered into and after it had received a substantial…

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